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Archive for January, 2012

A year and a half into my life as a Venture Capitalist, what have I learned? Not much? A lot? Always tough to answer…The past year has been an adventure. I’ve met and spoken with hundreds of entrepreneurs, operators and startup enthusiasts. The energy through the ecosystem is contagious, and having the ability to become a more integral part of the community on the west coast is humbling. So, through all this I must have learned something, right? Depends who you ask…

After having spent over a year now on the “dark side” and witnessing both booms and busts, one lesson, however, has become increasingly apparent: don’t get caught up in the hype, find your niche as an entrepreneur. Sounds cryptic, but it is not, it is simple. The underlying tenant here is that success is ultimately relative; therefore, know not only what you are good at, but also you want to accomplish. Sounds obvious, but the complication stems from the fact that often we (as in society) let our definition of success be influenced by others.

For example, take the buzz and community that has been built around tech blogs. Blogs like are excellent resources and are vital parts of our ecosystem, but because of the hype that is created by each article and/or announcement, we often times judge a company by the number of press releases and subsequently, the amount of capital it has raised. In some circumstances, this may correlate with the companies and founders definition of success; in others, however, it may not. This is not a problem in it of itself. What is a problem is when an entrepreneur building a business geared toward short-term monetization and profitability (personal sustainability), not scale, switches her strategy toward building headlines and disrupts the balance of her organization.

Generally speaking, an entrepreneur sets out to build a business with both a personal and professional goal in mind. In my experience, these goals range from creating a “disruptive change agent” to building a “lifestyle business” that can sustainably operate, with an array of other options somewhere in between. Each startup is created with the founder’s goals as their central DNA; generally speaking a company embodies the aspirations of its leaders. Every decision along the way, therefore, must align with these goals and aspirations: “how many people should I hire? how much capital should I raise? do we focus on distribution or profitability?”

Every entrepreneur is different, and therefore, she will have a different response to each question and to every decision. The biggest pitfall, however, is when these decisions are dictated by perceived success, rather than internal purpose; this is especially applicable to first-time entrepreneurs where each decision tends to be the first of its kind (and yes, I’m guilty and not immune to this as well).

Two key examples come to mind here: both pitfalls in hiring and fundraising. Say for instance, I am trying to create a productivity application for SMBs. My goal is to build a lean and profitable business, where not only I can bootstrap my operations, but I can also grow my team, product and revenues sustainably (by the way, I love these businesses!). In this situation, my gut tells me I’d rather hire a small, but highly flexible team; while also minimizing burn and outside capital. Since the focus here is not to achieve venture returns, I’d ideally like to raise $1M from angel investors who are experts in the space and also can add value (through connections, introductions or product guidance). Now my peers are telling me for my business to be successful, I need to raise a lot of money, hire a large team and not worry about revenue, instead focus on short-term wins that create acquisition interest. Institutional investors, who are looking for companies to provide venture returns (i.e. big exits and liquidity events), are preaching scale and dangling the carrot of a big check. In some cases, these may be the right answers, but in others they are not. How do you know? Well, what are your personal aspirations…

Mark Zuckerberg spoke to YCombinator a few months back on the same issue. His point revolved around the short-term nature of entrepreneurs in Silicon Valley. Ultimately, he distinguishes between quick exits and long-term growth…again, results driven by the aspirations of entrepreneurs. At the end of the day neither are wrong (and entrepreneurs can be successful in each situation), but mistakes and complications arise are when we confuse one for the other, and are not ready or equipped (mentally or professionally) for the path.

Personally and professionally, I get extremely excited when I met an entrepreneur with a big vision, building a disruptive business. On the flip side, however, I have a lot of respect for an entrepreneur bootstrapping a business, focusing on profitability while also staying disciplined – they too are creating significant value, and fueling the economy through innovation and job growth. And while one may get more press and buzz than the other, both are extremely successful. Each company entrepreneur has their own niche, and matching your business to your goals is the quickest way to avoid pitfalls and become successful.